Management chap 3

A Global and Entrepreneurial Perspective

MANAGEMENT

PRINCIPLES OF MANAGEMENT

Sr. No. Chapter No. Chapter Heading1 1 Management: Science, Theory and Practice (27th September 2010)2 4 Essentials of Planning and Managing by Objectives (4th Oct)3 5 Strategies, Policies and Planning Premises (11th Oct)4 6 Decision Making

5 7 The Nature of Organizing, Entrepreneuring, and Reengineering

6 8 Organization Structure: Departmentation7 9 Line/ Staff Authority, Empowerment and Decentralization8 10 Effective Organizing and Organization Culture9 14 Human Factors and Motivation

10 15 Leadership11 16 Committees, Teams and Group Decision Making12 18 The System and Process of Controlling

Sessional Evaluation External Evaluation15 15 20 50 50

Quiz per Class Assignment & Presentation Mid-term Total Sessional External Exam

Chapter 3

Strategies, Policies and Planning PremisesmQ

TABLE OF CONTENTS

1. The nature and purpose of strategies and policies2. The strategic planning process3. The tows matrix: a modern tool for analysis of

the situation4. Blue ocean strategy: in pursuit of opportunities in

an uncontested market5. The portfolio matrix: a tool for allocating

resources6. Major kinds of strategies and policies7. X:Hierarchy of company strategies8. X:Porter’s industry analysis and generic

competitive strategies9. Premising and forecasting

THE NATURE AND PURPOSE OF STRATEGIES AND POLICIES

1. STRATEGY: The determination of the mission or purpose and the basic long-term

objectives of an enterprise, followed by the adoption of courses of action and allocation of resources necessary to achieve these aims.

2. POLICIES: General statements or understandings that guide managers’ thinking

in decision making They ensure that the decisions fall within certain boundaries

SIMILARITIES: They give direction They are frame work for plans They are the basis of operational plans They affect all areas of managing

MAJOR DIFFERENCE: The essence of policy is discretion Strategy concerns the discretion, in which human and material

resources will be applied in order to increase the chance of achieving selected objectives

Tactics: the action plans through which strategies are executed.

THE STRATEGIC PLANNING PROCESS

Inputs:People, Capital,

Managerial skills,

Technical Skills,Others

Goals of Stake

holders:EmployeesConsumersSuppliers

Stock holdersGovt

CommunityOthers

IndustryAnalysis

Enterprise

Profile

Executive

orientation

values vision

•Mission•Major

Objectives

•Strategic Intent

Development of

alternative strategies

Present & Future

External Threats &

Opportunities

•Internal weaknesse

s & Strengths

Evaluation & strategic

choice

Implementation

Medium & Short Range

planning

•Reengineering Organization

structure Staffing

Leadership Control

Consistency Testing

Contingency Planning

THE STRATEGIC PLANNING PROCESS1. Inputs to the organization2. INDUSTRY ANALYSIS

The competition and its kinds available Possibility of new firms entering Availability of substitute products or services Bargaining position of the suppliers and buyers

3. ENTERPRISE PROFILE Mission Geographic orientation (would it operate in

home country or in different countries Competitive position of the company itself

4. Orientation, vision and values of executives

THE STRATEGIC PLANNING PROCESS

4. Mission (purpose), major objectives, and strategic intent

MISSION: “what is our business” OBJECTIVE: “the end points towards which the activities

of the enterprise are directed” STRATEGIC INTENT: “the commitment to win in the

competitive market”6. Present and future external environment:7. Internal environment:8. Development of alternative strategies:

To concentrate To diversify International expansion Joint ventures Strategic alliances Liquidation Retrenchment

THE STRATEGIC PLANNING PROCESS9. Evaluation and choice of strategies:10. Consistency testing and contingency planning11. Medium and short range planning,

implementation through organizing, staffing, leading and controlling

QUIZWhat is meant by TOWSHow is the tows matrix helpful for an

enterprise?

The TOWS MATRIX:

T:O:W:S:

Strengths in internal departments like management, R&D, Finance, marketing, OD etc

Eg weaknesses in internal departments

Current and Future conditions in respect of economy, politics, financial regulations, new products, services and technology

The most successful strategy, utilizing the org’s strengths to take adv of opportunities

Developmental strategy: to overcome internal weaknesses to take adv of opportunities

Energy shortages, competition and other areas like conditions mentioned above

Use of strengths to cope up with threats or to avoid threats

Retrenchment, liquidation, joint ventures etc to minimize weaknesses & threats

FOUR ALTERNATIVE STRATEGIES

APPLICATION OF THE TOWS MERGER MATRIX FOR MERGERS, ACQUISITIONS, JOINT VENTURES AND ALLIANCES

TIME DIMENSION AND THE TOWS MATRIX

BLUE OCEAN STRATEGY

BLUE OCEAN STRATEGYTHE FOUR ACTIONS FRAMEWORK Identify and eliminate those factors that may

be unimportant to the buyer If elimination is not an option, consider

reducing those factors Raise or strengthen those factors that are

unique Create new and unique factors that are

wanted by the buyers but are ignored by the competition

Companies may adopt both the SO and SW alternative strategies

THE PORTFOLIO MATRIX: A TOOL FOR ALLOCATING RESOURCES

This tool was developed by Boston consulting group in 1970s.This is a relationship between Market Growth and Market share

of a company/ its business unit or a productThis was developed for large corporations with several divisions,

called as Strategic Business Units (SBUs) for the allocation of resources in the right place

By dividing the matrix into four areas, four types of SBU can be distinguished:

Stars - Stars are high growth businesses or products competing in markets where they are relatively strong compared with the competition. Often they need heavy investment to sustain their growth. Eventually their growth will slow down and, assuming they maintain their relative market share, will become cash cows.

Cash Cows - Cash cows are low-growth businesses or products with a relatively high market share. These are mature, successful businesses with relatively little need for investment. They need to be managed for continued profit - so that they continue to generate the strong cash flows that the company needs for its Stars.

THE PORTFOLIO MATRIX: A TOOL FOR ALLOCATING RESOURCES

Question marks - Question marks are businesses or products with low market share but which operate in higher growth markets. This suggests that they have potential, but may require substantial investment in order to grow market share at the expense of more powerful competitors.

Management have to think hard about "question marks" - which ones should they invest in? Which ones should they allow to fail or shrink?

Dogs - the term "dogs" refers to businesses or products that have low relative share in unattractive, low-growth markets. Dogs may generate enough cash to break-even, but they are rarely, if ever, worth investing in.

Criticism:Its too simplisticThe growth rate criterion is insufficient for the evaluation of

an industry’s attractivenessThe market share is also insufficient for estimating the

competitiveness

THE PORTFOLIO MATRIX: A TOOL FOR ALLOCATING RESOURCES

GROWTHFINANCEORNANIZATIONPERSONNELPUBLIC RELATIONSPRODUCTS OR SERVICESMARKETING

MAJOR KINDS OF STRATEGIES AND POLICIES

Planning premising:The anticipated environment in which plans are

expected to operateEnvironmental Forecasting

Human and material resources and their opportunities and threats

Values and areas of ForecastingThe making of forecasts and their review by managers

compel thinking ahead, looking to the future, and providing for it

Preparation of forecast may disclose areas where necessary control is lacking

Forecasting, especially when there is participation throughout the organization, helps unify and coordinate plans. By focusing attention to the future, it assists in bringing a singleness of purpose to planning

The areas of forecasting; usually are economic, social, political/ legal, and technological environments

PREMISING AND FORECASTING

Forecasting with Delphi Technique:This technique was developed by Olaf Helmer ad

his colleagues at the RAND corporation for technological forecasting

The process is as follows:A panel of experts on a particualr problem area is

selected, usually from both inside and outside the organization

The experts are asked to make a forecast (anonymously) in terms of discoveries and developments

The answers are compiled and fed back to the audienceFurther estimates of future are made collectivelyRepetitions take place if required for further additionsWhen a convergence of opinion begins to evolve, the

results are then used as an acceptable forecast

PREMISING AND FORECASTING